What indications occurred in the 2000 – 2006 housing market that a bubble bust was eminent? Explain the concepts of loss aversion, value attribution, and group dynamics. An economic principle is that markets will act in rational ways. Given the rise and bust of the housing bubble, do you agree or disagree that consumers act rationally? Explain why or why not. For each concept about how consumers act irrationally, explain how it might have affected the thinking of buyers, lenders, and investors as housing prices were raising. Give clear examples about how people acted and the motivations that caused them to act that way. Describe a consumer decision you made recently that was irrational? Which of the ‘Irrational’ thought patterns formed the basis for your decision? What steps can you take to avoid making irrational financial and/or consumption decisions in the future?

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The Great Housing Bubble Some of the indications for the eminency of a bubble bust in the 2000 2006 housing market include drastic increase in the hou... View the full answer